A MetalMiner Index (MMI) Introduction and Analyzing the June Commodity Drop Off (Part 3)

In Part 1 and Part 2 of this series, we provided backgrounder on MetalMiner's ten different MMIs highlighting metal price trends by specific industry (the Auto MMI®, Construction MMI, Renewables MMI) and by vertical metal sector (the Raw Steels MMI, Stainless MMI, Aluminum MMI, Copper MMI, Rare Earths MMI, Global Precious Metals MMI and the world's first GOES MMI). We also began to examine the June MMI numbers. Spend Matters readers can download a detailed report on the June MMI numbers over on MetalMiner. In today's post, we feature the continuation of our discussion with MetalMiner's Lisa Reisman on what the June MMI numbers suggest.

Spend Matters: What do the June MMI numbers suggest about global demand and the world economy?

MetalMiner: The cautionary red flag is waving. If you want to look at the health of the global economy, you look at global precious metals MMI, Copper MMI -- and copper fell hard. It was down over 16%. I think what was more disconcerting, however, were the drops in some of the other indexes that typically are not impacted by speculative flows, investor sentiment, etc. Across the board, it was not a financial sell-off, but we saw some real declines by industry and metal type. The downward pressure is more fundamental to actual demand.

Spend Matters: What fared best?

MetalMiner:The renewables index held steady, and the rare earth and aluminum did better than the others. They all fell, but they fell the least (and held close to the January baseline, except the Rare Earths MMI, which dropped significantly in March and has not recovered).

Aluminum is currently at its marginal cost of production and there is enough demand with tight available supply that it has had "some" support. I think shale gas plays and demand for steel plate products has supported the renewables index. Rare earths drifted slightly lower. Thanks in part to the export controls that China put into effect, global supply, which is artificially constrained, helped maintain pricing with only minimal additional declines.

Spend Matters: How can companies use this data?

MetalMiner: The MetalMiner IndX data, based on underlying metal prices, fell across the board, mirroring much of the broader economic data released at the end of May 2012. As an example, automotive sales, though still growing over a year ago, declined from an annual anticipated sales rate of over 14 million vehicles to 13.8 million vehicles. The MetalMiner Automotive MMI® fell nearly 7 percent from May to June to 98, but remains only two percent lower than the baseline January 1, 2012 reading. That fall came from drops in hot dipped galvanized pricing among other price indicators. One might expect, and the Automotive MMI demonstrated, that a slight drop in demand for autos negatively impacts the prices of metals used in the automotive industry.